9 Biggest Trade Wars in History

Wars on trade are a common topic in world history – especially with news going around regarding trade wars under the Trump administration. In fact, President Donald Trump stated, “Trade wars are good and easy to win.”

While there are pros and cons to economic conflicts, most would agree that they are damaging, potentially avoidable, and that “nobody ever wins.” Others can see the benefits of U.S. trade wars but not without their destruction. It can be a very Yin-Yang situation.

However, looking at some of the biggest, dirtiest, most unsuccessful, yet most known economic wars in history, you can decide for yourself if Trump’s trade war with China would benefit or destroy U.S. trade, and if these wars on a broad scale are something we should engage in.

1. McKinley Tariff of 1890

Designed to protect against foreign competition, Representative William McKinley proposed the McKinley Tariff or the Tariff of 1890 that began October 1, 1890. U.S. Republicans supported the tariff raise by almost 50 percent on average duty on imports, making it one of the worst U.S. trade wars in history. Once enacted, most Americans were strongly against the higher cost of goods.

However, because Democrats highly opposed it the Wilson-Gorman Tariff Act of 1894 eventually lowered the once-skyrocketing tariffs.

Dartmouth college professor, Douglas Irwin, found in 1998 that the 1890 tariff, despite its initial plan, actually decreased domestic revenues by 4 percent: from $225 million to $215 million.

2. Wilson-Gorman Tariff Act of 1894

Also known as the Revenue Act, the Wilson-Gorman Tariff Act of 1894 attempted to get other countries to lower their tariffs by lowering their own. Besides slightly lower tariffs, sugar, coal, wool, and lumber became duty-free.

Along with attempting to encourage lower tariffs from other countries, this U.S. trade war occurred in part to help the United States recover from the Panic of 1893. However, none of its goals were met, making it one of the biggest fails among U.S. trade policy.

But if there is anything good to say about this trade war, Cuba was happy as they could ship large amounts of sugar to the United States for low costs. When it comes down to the tariffs’ overall success, let’s just say there wasn’t any for the U.S. If anything, U.S. trade allies took advantage of the opportunity for lower tariffs.

3. Dingley Act of 1897

Among the worst trade wars in history, one can’t pass up the Dingley Act of 1897, brought to us by Representative Nelson Dingley, Jr. This U.S. trade war tried to fix the damage caused by the Wilson-Gorman Tariff Act of 1894.

Via the Dingley Act, tariffs were raised again in opposition of the 1894 act. President William McKinley and his administration hoped that the Dingley Act would become like the McKinley Tariff of 1890 through bringing back protectionism.

Duty-free wools and hides under the Dingley Act were given imposed duties while tariff rates doubled for china, silk, woolen, and linen. Sugar tariffs were raised to 40 percent. In turn of higher sugar tax, the depression of the 1890s was exasperated for Cuba as they had a major sugar industry.

Farm state representatives were unhappy with the Dingley Act, but they failed to end the increased taxes.

This tariff remained in placed for over a decade despite it being the highest protective tariff in U.S. history.

4. Payne-Aldrich Act of 1909

Named after Representative Sereno E. Payne and Senator Nelson W. Aldrich, the Payne-Aldrich Tariff Act of 1909 was a compromise of the initial Payne Act.

This compromise act was designed to drop the tariff on general goods coming into the United States (which some Americans requested) – and the Aldrich proposal that sought to protect tariff rates in favor of Conservative Republicans. The goal was to assist with the United States’ current issue with high inflation.

However, tariff rates on general goods were only decreased by a measly 5 percent – from 46 percent to 41 percent – while tariffs on animal hides, coal, iron ore were increased.

As a result, the Payne-Aldrich tariff caused a temporary split between the Republican Party into Progressives and Old Guards (Conservative Republicans) – causing a loss for the split party during the 1910 congressional election.

Progressives were upset with the tariff, growing angry with President William Howard Taft, calling him weak and indecisive with his unsuccessful act.

5. Fordney-McCumber Tariff Act of 1922

Next on our list is the Fordney-McCumber Tariff Act of 1922 which raised many American tariffs with the goal to protect domestic factories and farms in part so returning World War I soldiers would have a great job outlook to look forward to while emphasizing the success of U.S. monopolies.

However, this act triggered a conflict with several European countries who traded with the U.S. In turn, others raised their tariffs in response. For Europe, American trade was increasingly more difficult. As a result, it made it hard for them to pay off war debts – especially for Germany who owed billions of dollars to France and England.

6. Smoot-Hawley Tariff Act of 1930

One of the worst economic wars in history arose from the Smoot-Hawley Tariff Act of 1930 which enacted protectionist policies. Supported by Senator Reed Smoot and Representative Willis C. Hawley, significant tariff rates were imposed on farm products, and eventually, on other factory-made goods as well.

The tariffs apart of the Smoot-Hawley Act ended up being the highest ever on farm and manufactured products. In response, retaliation threats came from other countries. Foreign countries began to increase rates on the U.S., and boycotts occurred.

Due to the shambles of the Smoot-Hawley tariff, many began to blame it for starting the Great Depression.

7. Anglo-Irish Trade War of 1932-8

When it comes to the flexing of economic muscles, the US is usually in the spotlight. This time however, Uncle Sam isn’t involved.

The Anglo-Irish Trade War of 1932 to 1938, or the Economic War, occurred between the United Kingdom and the Irish free state. It was started as a method of retaliation.

The 20 percent import duties created on coal and cattle ended up turning back on the Irish as they were left with a surplus of cattle and had to slaughter many considering they couldn’t be traded with Britain.

Because of this war on trade, both countries enacted unilateral trade restrictions. As a result, the Irish economy was dramatically affected.

8. Bush Steel Tariff of 2002

President George W. Bush imposed steel tariffs back in 2002. Tariffs on steel imports were as high as 30 percent to deter lower-cost foreign competition from the United States. Despite supposedly helping domestic steelmakers, the President Bush’s tariff was debatable among Americans.

After the tariffs were imposed, immediate uproar came from Europe threatening retaliation tariffs in the form of Floridian oranges and vehicles from Michigan, for instance.

After receiving more threats from Europe’s trading partners, the steel tariffs were lifted in December of 2003. However, the tariffs were originally planned to last until 2005, but the plan only drew further away from Bush’s desire for free trade.

9. U.S.-China Tire Tariffs of 2009-12

Shortly after President Obama enacted tire tariffs up to 35 percent on China back in 2009, China fought back by imposing penalties on U.S. chicken parts.

Some believed that the tire tariffs saved over 1,200 U.S. jobs in the industry and that domestic tire production as at an all-time high, but it wasn’t without its disadvantages.

Americans were paying more for their tires. Even tires from China cost consumers as much as 26 percent more than before the tariffs were enacted. Of course, the penalties on U.S. chicken parts had detrimental effects as well, costing us a whopping $1 billion.

FAQ:

To better understand the concepts surrounding these economic battles, let’s look some FAQs.

Are trade wars good? Trade wars can have detrimental effects on one or both countries involved. Domestically, they can decrease a purchaser’s freedom, forcing them to buy domestic, higher-priced products. Usually, for both countries involved, profits decline – especially because the other country often retaliates.

However, wars over trade can be beneficial in the sense that they can potentially increase revenue for the Government as well as suppress competition from foreign countries. Trade wars can also be good in that they can decrease the success of another country’s trade that is being targeted.

What does a trade war mean? A trade war is an implementation of increased (or sometimes decreased) tariffs or quota restrictions with the goal to damage another country’s trade. However, in the case of the Wilson-Gorman Tariff Act of 1894, reduced tariffs were enacted to try to influence other countries to do the same.

These conflicts escalate when the associated country tries to fight back using similar techniques regarding trade restrictions or tariff changes.

Have these tactics ever worked? According to Senator Ben Sasse, no trade war in history has ever worked. From the examples in the above article, we can see that these acts of war on trade have failed at some point. Each tariff act that came afterward tried to oppose and/or repair the damage of the previous.

However, you can be the judge and decide for yourself if any trade war in history has had benefits – whether that be during or after the fact.

Is there and economic showdown on the horizon? Based on the past, history often repeats itself. However, considering recent news, whether trade wars between China and USA will actually occur is a different question. Some are in denial as they say China is already suffering economically and isn’t capable of gaining much. Others believe a China-USA trade war is looking likely.

What would a trade war with China mean? As of right now, China is waiting for the U.S. to lead a potential trade war. However, a full-blown one does occur, speculations vary. But with over 1,300 new China exports on products from medical equipment to televisions, many believe that Americans will be faced with higher market costs and reduced purchasing decisions. Some fear that another trade war would result in a recession or even depression.

Others are ecstatic regarding more locally-sourced goods in the U.S. market if the war does occur. As for who would win, some say China, others say the U.S. Everything is up in the air at this point.

How do they start? An economic war begins when one country begins placing trade restrictions and/or increased tariffs on another country. The opposing country may or may not fire back. Regardless, one or both countries may suffer.

Is trade war inevitable? Many believe that conflicts like this are inevitable as trade has a heavy impact on a country’s revenue and is highly competitive by nature. Others think wars on trade can be avoided by making an agreement with another nation. In the end, there are economic pros and cons to trade wars as well as avoiding one.

Will an economical war lead to physical war? While not all trade wars will start a war, some will and certainly have done in the past. A real war involving physical combat that threatens national security is not required for an economic war to occur.

Will trade war affect Amazon? If an economical battle between the U.S. and China does hit, it’s believed that Amazon users may eventually be paying higher costs on the platform. Another belief is that this trade war would increase imports from Vietnam and India as tariffs on Chinese goods increase.

Did trade wars cause the Great Depression? It is said that the trade war of 1930 did not cause the Great Depression. However, this trade war did exasperate and lengthen the Great Depression.

Are they as easy to win as Donald Trump suggests? Despite Trump’s trade rhetoric about these economical wars being “easy to win,” the truth is that they’re not easy to win for many different reasons (However, some trade wars against some nations may be deemed easy.):

• Trade wars often raise domestic costs as competition is reduced.
• Tariffs don’t always create more U.S. jobs.
• Increasing tariffs or implementing quota restrictions can provide opposite effects, as we’ve seen with the McKinley Tariff of 1890.
• Situations like this can cause uncertain political dysfunction.